B-60354, SEPTEMBER 12, 1946, 26 COMP. GEN. 188

B-60354, SEPTEMBER 12, 1946, 26 COMP. GEN. 188

PERSONAL SERVICES - ACCOUNTING SERVICES - APPLICABILITY OF MAXIMUM COMPENSATION LIMITATION OF ACT OF AUGUST 2, 1946 THE MAXIMUM COMPENSATION LIMITATION PRESCRIBED BY SECTION 15 OF THE ADMINISTRATIVE EXPENSE ACT OF AUGUST 2, 1946, PROVIDING FOR THE PROCUREMENT OF OTHERWISE AUTHORIZED PERSONAL SERVICES BY CONTRACT, IS NOT FOR APPLICATION IN THE CASE OF FIRMS OR ORGANIZATIONS WHEN THE SERVICE CONTRACTED FOR CLEARLY IS OF NONPERSONAL NATURE, BUT, RATHER, IS FOR APPLICATION EXCLUSIVELY TO THE TYPE OF INDIVIDUAL SERVICES OF A PURELY PERSONAL NATURE CONTEMPLATED BY THE CLASSIFICATION ACT. ACCOUNTING SERVICES FURNISHED UNDER A CONTRACT TO BE ENTERED INTO WITH THE WAR ASSETS ADMINISTRATION PURSUANT TO SECTION 5 (B) OF THE SURPLUS PROPERTY ACT OF 1944, FOR THE FACILITIES OF A FIRM TOGETHER WITH THE COORDINATED SERVICES OF ITS EMPLOYEES WITHOUT SUPERVISION OR CONTROL BY THE GOVERNMENT ARE THOSE OF THE FIRM ITSELF AND MUST BE CONSIDERED AS NONPERSONAL IN NATURE, AND, THEREFORE, COMPENSATION PAYMENTS THEREUNDER WILL NOT BE SUBJECT TO THE MAXIMUM COMPENSATION LIMITATION IMPOSED ON PERSONAL SERVICE CONTRACTS BY SECTION 15 OF THE ADMINISTRATIVE EXPENSE ACT OF AUGUST 2, 1946, REGARDLESS OF THE MEANS EMPLOYED TO DETERMINE THE AMOUNT OF COMPENSATION PAYABLE UNDER SUCH A CONTRACT.

COMPTROLLER GENERAL WARREN TO THE ADMINISTRATOR, WAR ASSETS ADMINISTRATION, SEPTEMBER 12, 1946:

THERE HAS BEEN CONSIDERED YOUR LETTER OF AUGUST 30, 1946, REFERENCE AGC, RELATIVE TO CERTAIN CONTRACTS WHICH YOU PROPOSE TO ENTER INTO WITH VARIOUS FIRMS OF PUBLIC ACCOUNTANTS FOR THE PURPOSE OF ACCOMPLISHING A "TIMELY AND ACCURATE AUDIT" OF TRANSACTIONS HANDLED BY YOUR INDUSTRY AGENTS IN THE DISPOSITION OF SPECIFIED TYPES OF SURPLUS PROPERTY. WITH RESPECT TO THE PERTINENT PROVISIONS OF THE SAID CONTRACTS YOUR LETTER CONTAINS THE FOLLOWING STATEMENT:

THE PROPOSED CONTRACTS WITH THESE ACCOUNTING FIRMS WOULD PROVIDE FOR THE ASSIGNMENT OF SPECIFIC PROJECTS FOR A CONSIDERATION STATED IN TERMS OF SPECIFIC RATES PER HOUR. THESE RATES INCLUDE PROFIT, OVERHEAD COSTS, INCIDENTAL LABOR COSTS AND VARIOUS MISCELLANEOUS EXPENSES AS WELL AS THE SALARY OF THE AUDITOR OR ACCOUNTANT WHO SERVES AS THE MEASURE OF CONSIDERATION. THIS METHOD OF COMPENSATION ACCORDS WITH ESTABLISHED COMMERCIAL PRACTICE; AND CARE WILL BE EXERCISED TO ASSURE THAT THE RATES SPECIFIED IN EACH CONTRACT ARE COMPARABLE WITH THE STANDARD RATES EXISTING IN THE AREA IN WHICH THE CONTRACT IS TO BE PERFORMED. FURTHERMORE, EACH CONTRACTOR WILL BE ASSIGNED TO AUDIT NUMEROUS INDUSTRY AGENTS. TO THE EXTENT PRACTICABLE, NONE WILL BE ASSIGNED TO A SINGLE INDUSTRY AGENT ON A RESIDENT BASIS.

IN VIEW OF THE NATURE OF THE CONTRACTS INVOLVED YOU REQUEST ADVICE AS TO WHETHER PAYMENTS THEREUNDER IN EXCESS OF THE MAXIMUM PER DIEM RATES PRESCRIBED BY THE CLASSIFICATION ACT WOULD BE PROHIBITED BY SECTION 15 OF THE ACT OF AUGUST 2, 1946, PUBLIC LAW 600, 60 STAT. 810, THE PROVISIONS OF WHICH ARE AS FOLLOWS:

SEC. 15. THE HEAD OF ANY DEPARTMENT, WHEN AUTHORIZED IN AN APPROPRIATION OR OTHER ACT, MAY PROCURE THE TEMPORARY (NOT IN EXCESS OF ONE YEAR) OR INTERMITTENT SERVICES OF EXPERTS OR CONSULTANTS OR ORGANIZATIONS THEREOF, INCLUDING STENOGRAPHIC REPORTING SERVICES, BY CONTRACT, AND IN SUCH CASES SUCH SERVICE SHALL BE WITHOUT REGARD TO THE CIVIL-SERVICE AND CLASSIFICATION LAWS (BUT AS TO AGENCIES SUBJECT TO THE CLASSIFICATION ACT AT RATES NOT IN EXCESS OF THE PER DIEM EQUIVALENT OF THE HIGHEST RATE PAYABLE UNDER THE CLASSIFICATION ACT, UNLESS OTHER RATES ARE SPECIFICALLY PROVIDED IN THE APPROPRIATION OR OTHER LAW) AND, EXCEPT IN THE CASE OF STENOGRAPHIC REPORTING SERVICES BY ORGANIZATIONS, WITHOUT REGARD TO SECTION 3709, REVISED STATUTES, AS AMENDED BY THIS ACT.

BY SPECIFICALLY PROVIDING THAT THE MAXIMUM COMPENSATION LIMITATION PRESCRIBED IN THE ABOVE-QUOTED SECTION SHALL HAVE EXCLUSIVE APPLICATION TO AGENCIES SUBJECT TO THE CLASSIFICATION ACT, AND BY FIXING THE SAID LIMITATION AT THE PER DIEM EQUIVALENT OF THE HIGHEST RATE PAYABLE UNDER THAT ACT, IT LOGICALLY MAY BE PRESUMED THAT THE CONGRESS INTENDED THAT SECTION TO APPLY EXCLUSIVELY TO THE TYPE OF SERVICES CONTEMPLATED BY THE CLASSIFICATION ACT. IN OTHER WORDS, SINCE THE CLASSIFICATION ACT RELATES TO INDIVIDUAL SERVICES OF A PURELY PERSONAL NATURE AND HAS NO EFFECT EITHER TO AUTHORIZE OR RESTRICT THE PAYMENT OF COMPENSATION TO FIRMS OR ORGANIZATIONS OF EXPERTS, AS SUCH, SECTION 15, SUPRA, IN A LIKE MANNER IS LIMITED IN ITS SCOPE, AND IS NOT FOR APPLICATION IN THE CASE OF FIRMS OR ORGANIZATIONS WHEN THE SERVICE CONTRACTED FOR CLEARLY IS OF A NONPERSONAL NATURE.

WITH RESPECT TO THE MATTER PRESENTED IN YOUR LETTER, THE WAR ASSETS ADMINISTRATION SPECIFICALLY IS AUTHORIZED BY SECTION 5B OF THE SURPLUS PROPERTY ACT OF 1944, 58 STAT. 765, 768, TO CONTRACT WITH ACCOUNTING FIRMS AS MAY BE NECESSARY TO CARRY OUT ITS FUNCTIONS.

ALTHOUGH SERVICES PERFORMED PURSUANT TO THE CONTRACTS WHICH YOU PROPOSE TO ENTER INTO BY VIRTUE OF THAT AUTHORITY APPARENTLY ARE TO BE COMPENSATED FOR UPON THE BASIS OF SPECIFIED HOURLY RATES FOR DIRECT SERVICE RENDERED BY EACH CLASS OF PROFESSIONAL OR ADMINISTRATIVE PERSONNEL EMPLOYED BY THE CONTRACTOR, IT DOES NOT APPEAR THAT SUCH CONTRACTS CONTEMPLATE THE MERE PERSONAL SERVICES OF ANY INDIVIDUAL OR GROUP OF INDIVIDUALS BUT, ON THE CONTRARY, SEEK TO ENGAGE THE FACILITIES OF THE FIRM AS WELL AS THE COORDINATED SERVICES OF THE EXPERTS AND TECHNICIANS AVAILABLE TO IT. MOREOVER, BY VIRTUE OF THE PROPOSED CONTRACTS THE EMPLOYEES AND MEMBERS OF THE CONTRACTING FIRMS DO NOT BECOME SUBJECT TO SUPERVISION OR CONTROL OF THE GOVERNMENT TO SUCH EXTENT AS USUALLY PREVAILS IN THE CASE OF EMPLOYER- EMPLOYEE RELATIONSHIPS. IN VIEW THEREOF, ANY SERVICE FURNISHED PURSUANT TO THE PROPOSED CONTRACTS IS THAT OF THE FIRM ITSELF AND MUST BE CONSIDERED NONPERSONAL IN NATURE REGARDLESS OF THE MEANS EMPLOYED TO DETERMINE THE AMOUNT OF COMPENSATION PAYABLE THEREUNDER.

FOR THE FOREGOING REASONS YOU ARE ADVISED THAT COMPENSATION PAYMENTS UNDER THE PROPOSED CONTRACTS WITH ACCOUNTING FIRMS ARE NOT SUBJECT TO THE LIMITATIONS PRESCRIBED IN SECTION 15 OF THE ACT OF AUGUST 2, 1946, SUPRA.